After pulling off a $16.5bn bond issue, the largest ever by an emerging markets nation, Argentina is the new favourite among investors.
By contrast neighbouring Brazil, yesterdays darling, is gripped by recession, political crisis and a graft scandal so encompassing it has dispatched some of the countrys most powerful people to jail.
South Americas two largest economies have a long history of mutual jealousy. But as each grapples with the problems of corruption and the economic slowdown that has followed the commodity price bust, the rivalry is taking on new meanings.
Brazil, to the annoyance of some Argentines, has a fiercely independent judiciary that has doggedly pursued an investigation into corruption at Petrobras, the state-owned oil company – a process that could lead to the impeachment of president Dilma Rousseff.
Argentina, meanwhile, has what many Brazilians desperately want: a reformist government. President Mauricio Macris administration, elected four month ago, has begun to reverse the economic legacy of the populist former president Cristina Fernández, including pushing through the record bond issue.
“I hope we can free ourselves of those who are addicted to power to satisfy their own political projects,” says Miguel Reale Júnior, a former Brazilian justice minister. “I hope Brazil becomes Argentina.”
Such a statement by a Brazilian politician would have been unthinkable just a few months ago. But it has been encouraged by the possibility that vice-president Michel Temer, who would replace Ms Rousseff should she face a formal impeachment process, could lead a similar reform effort.
Brazilians are brought up to believe their country is superior to Argentina in everything from football to the economy and foreign affairs. While Buenos Aires has long talked of reclaiming the tiny Falkland Islands – or Malvinas – from the UK, Brazils goal has been a permanent seat at the UNs Security Council.
Now, though, such perceptions are being turned on their head.
As Brazil suffers its worst recession in a century, Mr Macri has moved to abandon economic interventionism, dismantle currency controls, liberalise trade and re-engage Argentina with the world economy. The International Monetary Fund forecasts that Brazils $1.5tn economy will flatline next year, while Argentinas $438bn economy will grow 3 per cent.
“Brazil is starting to resemble what Argentina once was,” says Otto Nagami, an economics professor at São Paulos Insper business school.
During recent street marches against Ms Rousseff and her ruling Workers party, or PT, some demonstrators waved banners calling for: “Less Venezuela, more Argentina.”
“It is a symptom of Brazilians desperation,” says Rafael Alcadipani, an academic at the Getulio Vargas Foundation in São Paulo. “The hatred many feel towards the PT is even bigger than their hatred for Argentina.”
Yet while many would expect Mr Temer to enact Argentine-style reforms should he take over as acting president, he would face significant challenges. The Petrobras corruption probe could yet hit his own opposition PMDB party, while spending cuts would be unpopular.
In other areas, however, Argentines look enviously towards Brazil. Many cast an eye north to admire the strength of Brazils institutions, especially its judiciary.
Brazil also continues to attract significant foreign direct investment, which rose to $17bn in the first quarter of 2016 compared with $13.1bn in the same period last year, according to Alejandro Werner, head of the IMFs western hemisphere department. In part, that is due to the resilience of Brazilian institutions.
Argentinas judiciary, by contrast, suffers from a “serious crisis of legitimacy”, says Guillermo Jorge, a criminal lawyer in Buenos Aires. While Brazilian judges have detained former presidents and some of the countrys richest men, “Argentine judges are not very brave”, adds Mr Jorge, a partner at Governance Latam, an anti-corruption group.
“They know that if you go after someone more powerful than you, they can destroy you in 15 minutes,” he adds.
The question of corruption has raised its head again in Argentina following a number of cases against senior officials in the administration of Ms Fernández.
Lázaro Báez, a businessman from Patagonia, was arrested this month after being accused of embezzlement and laundering money for Ms Fernández and her deceased husband and predecessor Néstor Kirchner. He denies the accusations. Other powerful figures are also being investigated by federal prosecutors, including Julio de Vido, a former planning minister, and cabinet minister Aníbal Fernández. They also deny wrongdoing.
But few Argentines expect these investigations to go far. Carlos Germano, a political analyst in Buenos Aires, points out that cases are being handled by “the same judges that just a year ago looked the other way”.
There is also a sense of a witch-hunt, given that Argentine judges are going after those who have left office while their peers in Brazil are pursuing those still in power.
“Nevertheless, a door has been opened and it is going to be very difficult to close it,” says Mr Germano, echoing a common sentiment around the region, where impunity is no longer tolerated as it once was amid the economic bust. “Societys demands to see justice done are very strong.”
Source: Financial Times Online – 05/04/2016
Centro de Gestão e Políticas Públicas do Insper amplia ações em ensino, pesquisa e difusão de conhecimento